Articles from March 2011

Following on a torrent of amicus submissions that have made Dukes v. Wal-Mart, 603 F.3d. 571 (9th Cir.) (en banc), cert granted, 131 S. Ct. 795 (Dec. 6, 2010) (No. 10-277) perhaps the most extensively briefed case in Supreme Court history, the case is now set for oral argument next Tuesday, March 29, 2011. In concert with AT&T v. Concepcion (which takes up the validity of class action waivers), Dukes represents an opportunity for the Roberts Court to remake the rules applicable to class actions in federal courts.

Apart from taking up several discrete issues broadly relevant to nearly all class actions, Dukes is effectively a Rorschach test on class actions: Corporate interests see Rule 23 as merely a device for “greedy” plaintiffs’ firms (is there any other type?) to blackmail companies into paying attorneys’ fees, while consumer and employee rights advocates contend that class actions are a necessary corrective in the free market system.

While oral argument can be an unreliable indicator of Supreme Court outcomes, there are some tendencies to look out for during next Tuesday’s session. For instance, do Justices presumed to be unsympathetic to class actions (notably Scalia, Thomas, and Alito) appear swayed by class action supporters’ market-based arguments? Is a radical remaking of class action rules harmonious with a conservative Justice’s preference for stability and predictability? Likewise, oral argument will occasionally reveal signs of ideological drift on the Court’s liberal wing. Justice Breyer, for instance, while known as a member of the progressive bloc of the Court, was at the forefront of the movement to deregulate airfares during the 1970s. Here, one should look for indications that a Justice presumed to be supportive of class actions harbors any skepticism toward the large and varied class in Dukes.

As with any case where big-picture procedural issues are at stake, it is likely that behind-the-scenes negotiations will result in complex majority opinions and concurrences in both Dukes and Concepcion that may be difficult to reconstruct from the Justices’ public statements at oral argument. The suspense should end by late spring, when decisions in both cases are expected to be issued.

With the proliferation of expensive cell phones, customers regularly buy insurance that will pay for a replacement phone in the event of loss, theft, or destruction, which typically includes a deductable. In Cole v. Asurion Corp., No. 06-6649 (C.D. Cal. filed Oct. 18, 2006), the plaintiff alleged that, as a result of a change in her cell phone insurance carrier, her deductable suddenly increased from $35 to $110. Her complaint included claims under California’s consumer protection statutes as well as common law claims for misrepresentation, breach of contract, and unjust enrichment. Significantly, in addition to alleging affirmative misrepresentations, the plaintiff also alleged material omissions which, if established, give rise to a class-wide presumption of reliance, obviating the most common and potent argument against class certification: that common questions of law or fact do not predominate.

Defendants made the familiar argument that variations in particular representations made to consumers precluded class certification altogether. Rejecting the defendants’ argument, the court granted certification on the omission-based theory of liability. Cole v. Asurion Corporation, 267 F.R.D. 322 (C.D. Cal. 2010). In so ruling, Central District Judge Phillip S. Gutierrez reinforced the trend of distinguishing misrepresentation- and omission-based theories of class-wide liability, and enforcing the presumption of reliance that attaches to material omissions. See, e.g., Wolin v. Jaguar Land Rover North America, LLC, 617 F.3d 1168 (9th Cir. 2010) (reversing denial of certification where district court abused discretion; common questions predominated as to defendant’s duty to disclose under consumer protection statutes).

Consistently reputed to be a collegial work environment with high job satisfaction, the elite San Francisco-based plaintiffs’ firm, Lieff Cabraser Heimann & Bernstein, has recently experienced internal conflict that has found its way into discussions on blogs and legal-themed message boards. The conflict’s rough outlines are as follows: Barry Himmelstein, a partner at Lieff Cabraser, is attempting to dissolve the firm, while the firm’s other partners have petitioned to send the dispute into arbitration to avoid the public relations debacle that could result from internal conflicts being aired in public court proceedings. Thus far, the bulk of the dispute’s substantive legal content is unknown, and the papers supporting the motion to compel arbitration cryptically allude to the competing legal theories and evidence that will be in play.

In an interview with The Recorder, Himmelstein located the dispute’s genesis in a debt-card fee class action in which Wells Fargo was ordered to pay $203 million, Gutierrez v. Wells Fargo Bank, No. C 07-05923 (N.D. Cal. Aug. 10, 2010). Himmelstein told The Recorder that he had urged the pursuit of punitive damages, which could have substantially increased the already ample damages award, as well as Himmelstein’s bonus share. Himmelstein’s strategy was rebuffed; the dispute burgeoned, resulting in Himmelstein being stripped of his voting rights. (See Kate Moser, Ex-Lieff Partner Says Strategy Feud Is Behind Ouster, THE RECORDER, Mar. 4, 2011, available here.)

Himmelstein’s bonus share in the Wells Fargo litigation is in abeyance, likely to be determined in the parties’ litigation or arbitration, as is his potential bonus share of a $410 million award that resulted from a MDL case that had been pending in a Florida United States District Court. Himmelstein’s claims may extend to other bonus sources, as well. While the Wells Fargo strategy dispute appears to have incited the parties’ conflict, it is not clear what role it will play in the actual legal theories at issue when the parties either litigate or arbitrate their dispute.

Also as reported in The Recorder, in a February 15, 2011 email responding to the suggestion that the parties arbitrate, Himmelstein augmented an initial “LOLOLOLOLOLOLOL!” response by adding, in a second email, “That was a big, fat, f*****g, ‘No,’ in case you needed translation.” (Kate Moser, Lieff Cabraser Partners in Nasty Feud, THE RECORDER, Feb. 25, 2011, available here.) Accordingly, indications are that Himmelstein will formally oppose the arbitration petition.

The annual ritual of debating the U.S. News and World Report law school rankings is being acted out again, as the former magazine issued its 2012 rankings. (U.S. News is now an entirely Internet-based presence, and its school rankings are its raison d’etre.) While Yale Law School is unsurprisingly ranked first again, it is notable that the University of Texas has cracked the virtually static “T-14,” albeit as the fifteenth school (due to a tie with Georgetown). The complete rankings are available here.

Though U.S. News is widely considered the definitive source of rankings for national law schools, when held up against actual placement data it is less clear that these rankings correlate with what arguably matters most, particularly in a bad economy: getting jobs at prominent law firms. The National Law Journal recently came out with its own rankings of the so-called “Go-To Law Schools” (available here). In this list, which purports to rank schools by likelihood of graduates landing BigLaw jobs, two of the perennial top-three U.S. News law schools—Yale and Stanford—do not even make the top 10, while the University of Chicago, Cornell, Columbia, and Penn place first through fourth (ahead of #5 Harvard Law School).

The public policy implications of the country’s legal recruiting process are significant. If plaintiff firms are to compete meaningfully for top legal talent, fee-shifting statutes (and judicial interpretation of them in the form of fee awards) must take into account the economic realities of firms that rely entirely on contingency-fee arrangements. Otherwise, BigLaw will maintain its hold on debt-ridden graduates from elite law schools, ultimately skewing the debate on key legal issues and undermining the enforcement of employee and consumer protections.